Social Security Programs and Retirement Around the World: Disability Insurance Programs and Retirement

David A. Wise

Abstract

This volume is the sixth phase of the ongoing project on Retirement Programs Around the World. The focus is on the importance of disability programs (DI) and in particular the retirement incentive effects of DI programs compared to other retirement programs. We give attention to the provisions of DI programs as well as the provisions of other pathways to retirement. The goal is to understand how changing the provisions of country DI programs in particular would change retirement. Each country estimated the relationship between program provisions and retirement incentives in their country using ... More

This volume is the sixth phase of the ongoing project on Retirement Programs Around the World. The focus is on the importance of disability programs (DI) and in particular the retirement incentive effects of DI programs compared to other retirement programs. We give attention to the provisions of DI programs as well as the provisions of other pathways to retirement. The goal is to understand how changing the provisions of country DI programs in particular would change retirement. Each country estimated the relationship between program provisions and retirement incentives in their country using an extension of the “option value model” used in the second phase of the program. The most important results are in the form of simulations. The simulations of retirement rates by age and survival in the labor force show very large variation across countries. Perhaps the most important simulations show the importance on retirement of differences in the provisions of each pathway to retirement in each country. These differences are estimated first by simulating the number of years worked between 50 and 69 if all persons faced only one of the pathways to retirement. For example, in the US, years worked would be 10.18 if all persons faced the DI pathway provisions. If all persons faced the Social Security pathway the average would be 11.93 years, an increase of 17.3 percent.